Episode Transcript
[00:00:00] So you think that you can use a land trust to completely Circumvent the new FinCEN Real Estate Residential Reporting rule.
[00:00:10] Unfortunately, there is nothing farther from the truth and I just wanted to spell that myth.
[00:00:21] I'm Jeff Segal. I'm a real estate and asset protection attorney with a lot of land trust experience based in Orlando, Florida. And here's what you need to know about land trusts, LLCs and the residential real estate reporting rule that FinCEN is going to start implementing on March 1, 2026 for every transaction that happens after that date. I've been in title, I was in title for almost 23, 24 years before I left title. Owned a land trust company in Florida for 20 years.
[00:01:03] We are the oldest and largest land trust company serving as land Trustee of over 2000 properties at any time throughout the state of Florida. So we have a little bit of experience in this. Plus I'm also an asset protection lawyer. So we use land trusts a lot with our clients in helping layer and segregate their assets away from themselves and away from each other for both horizontal and vertical asset protection with their real estate in Florida. So I know a little bit about this and I've also been studying the FinCEN Real Estate Residential Real Estate Reporting rule. We call it the Rrerr. That FinCEN first came out with the rule in August 2024. It was supposed to be implemented December 1, 2025. That has been delayed until March 1, 2026. So you may be watching this after it's implemented and after it's in place when I'm talking to you. Now we are coming up on the last couple of days here of February 2026, right before it goes into effect. But it will apply of course to closings that happen on March 1, 2026 and thereafter. Now the rule applies to any non financed transfers of residential real estate to entities or certain trusts. So let's parse that out first. Let's talk about that, what that means first. So it's cash transactions, non finance transactions. So a lot of people go, okay, well if I've got a private lender, if I've got a hard money lender, if I'm doing seller financing, if I'm doing subject, a financed transaction, right? So it's exempt, right? Wrong. Couldn't be farther from the truth. A financed transaction means that it has been financed by a bank or a mortgage lender or another institution that has an anti money laundering program that is already working with FinCEN to combat money laundering in the United States.
[00:03:06] So private Lenders, hard money lenders, seller financing, of course they do not have AML anti money laundering programs in place, of course.
[00:03:18] So those are considered to be cash transactions. So just because you hear well, it's a cash transaction, only cash transactions are covered by this rule. Cash transaction means anything that's not financed by pretty much a bank or a licensed mortgage lender that under the nmls that would have a money laundering program in place. So that's first residential real estate. So it's a transaction of residential real estate, a transfer of residential real estate. So what is a residential real estate? Residential real estate is anything that is one to four family real estate that is intended to be used as residence. So of course single family homes, condominiums, co op units, duplexes, triplexes, quadplexes, anything over that, it's not residential, so it would not be covered by the rule. Those are considered commercial or investment properties. So apartment complexes, while they're residential, those are usually much more than four units. So they're not going to be covered by the rule. So then we get into what about vacant land? Everybody wants to know, well what about vacant land? Well if you are buying a lot and it is capable of having a single family home built on it and you intend to construct a single family home or a duplex or triplex or quadplex on that vacant land, boom. It is covered by the rule so long as it is part of a non financed transaction of the transfer of residential property. So that is now residential property to an entity or a trust. So what is an entity? An entity encompasses LLCs, family limited partnerships, limited partnerships, general partnerships, associations, corporations, of course.
[00:05:06] So any transfer to an entity like that, unless it is an exempted entity, and there's a list of entities that are exempt, they are typically already regulated heavily by the sec, by banking officials, fdic, occ, all these other things that are automatically regulated in other ways. So FinCEN doesn't care about them. But if it's going into an llc, it would be an entity. So that would be a residential, a transfer of residential property to an entity, a non financed transfer of property to a residential entity. So for instance, if you convey your property, you own a single family home, you convey it into an LLC, even if you own 100% of that LLC, it does not matter. That is a transfer to an entity. And if there is a reporting person involved, we'll get to that in a minute, they have to report that transfer of that property to that entity to the FinCEN Bank Secrecy act database and that information will Go in there and we'll get to what that information is later and we'll get to what a reporting person is later. Now. But first I want to talk about trusts because this is where we really are involved. Heavily, heavily, heavily. Because we own a land trust company so we get calls all the time of people wanting to take property into trusts at closings or they just want to transfer property into a land trust for estate planning or asset protection purposes. So we're going to break that down. So non exempt trusts are covered by the rule. So a transfer to a non exempt trust. Now when I talk about a non exempt trust, there are certain trusts that are exempt because the FinCEN had a lot of comments made and a lot of rulemaking procedures they followed when they were coming up with this rule. And one of the biggest feedbacks they got was from the estate planning attorney realm. They did not want to have to report every time someone put a property into a revocable living trust for trust for based estate plans.
[00:07:22] So FinCEN said, okay, yeah, yeah, yeah, you're right, we don't care about that. That's not a money laundering type situation that we care about. So we will say if it's grantor trust and they go to what a grantor trust is and we'll get to that in a minute, then we're not gonna, that's, that's not covered by the rule.
[00:07:41] So an exception to the rule is you transfer it to a grantor, a revocable grantor trust. Now for these purposes, FinCEN intends the spirit, intent comments on the rule. Everything else about that rule says that they are, when they talk about that type of trust, they're talking about a trust that is a grantor trust as defined in the Internal Revenue Code, which is completely different thing. Now the Internal Revenue Code defines a grantor trust. And then FinCEN goes along with this. They say that the grantor, also known as a settlor, is conveying property that they own into a trust where they are the beneficiary and they control the income and outgo of that trust. Everything dealing with that trust, they are in total control of it.
[00:08:33] And that is a grantor retained trust and they have the right to revoke it at any time. Now it does not mean that the trustee has to also be the grantor, the person who put the property into trust. In most revocable living trusts and most estate planning trusts, that is going to be the case, the grantor. So if I own my property, my home, and I convey it to myself as Trustee of my family trust for myself during my life and I'm the beneficiary during my life and I have the right to revoke that. And while I am alive, I have the right to live there, enjoy the property, lease, sell, encumber and convey the property myself. I don't have any problems with it. That is 100% that is exempt from reporting under the FinCEN rule. Now a lot of people go, yeah, but what about if you have a third party trustee like your company as a land trust? Well, land trusts are grantor trusts. They are disregarded for tax purposes by the IRS just like any other revocable living grantor retained trust for estate planning. The grantee, the beneficiary is usually also the grantor, the current owner of the property. So typically, if I conveyed the property from myself to my company, my land trustee, Land Trust Service Corporation, TRSTLLC or any of the other companies that we have that acts as trustee for people, then I am also the beneficiary of that trust. That is a grantor trust and it does not have to be reported, that is for estate planning purposes, that is for asset protection purposes. So then the next question becomes, yes, yes, yes, but what if you. Then for additional asset protection, which we often recommend to people, you then assign your beneficial interest in the trust to a Wyoming LLC that you also own or any other, or to a family limited partnership.
[00:10:27] Or maybe you assign it to your revocable living trust. That is now a change in ownership, right? Correct. But we can show that that is not a transaction, that is not related to a transaction, a non financed transaction of the property. That is truly what the exception to the rule encompasses. What FinCEN intended was, hey, you can put it into trust for estate planning, you're the beneficiary. Later you assign your beneficial interest one that's an assignment of personal property. We don't care. That's just like selling a sofa. FinCEN has nothing to do with selling sofas or cars.
[00:11:06] It's not a transaction. In real estate. You have assigned a beneficial interest in your trust. And, and yeah, it went to another llc, it went to an entity. But hey, that's you. So if we ever, if FinCEN ever looked at that transaction, they go, okay, we see, yeah, there was no real transaction, there was just a transfer to a trust. It's grantor trust, it's exempt.
[00:11:27] Then you transferred it to your own llc. Exempt, we don't care.
[00:11:32] So we're good with that.
[00:11:33] So pretty much if you're, if you're Putting a property into a trust, land trust, which is a grantor revocable trust for yourself as the beneficiary, you're fine, you don't have to report that transaction, even if you later then assign your beneficial interest to another entity that you also control and it's yours. So that's all estate planning and asset protection.
[00:11:55] Well, there's another lawyer out on the Internet, I saw him on YouTube the other day and he's out there saying, well, you can use this exception as part of a non finance transaction to avoid having to file the FinCEN report.
[00:12:12] So what he suggests is basically what we do when we are hiding the purchase price in Florida from the official records we will have at the closing, the property will convey into trust, the seller is the initial beneficiary. So boom, we've got an exempt. Typically what would be an exemption?
[00:12:31] A grantor revocable trust.
[00:12:35] Right. So that would not be reportable because the seller is a beneficiary. Then the seller at closing assigns their beneficial interest in the trust to another end buyer that they don't control their entity or directly to them, they convey that to someone else.
[00:12:53] Well, we would argue, and FinCena also believe, would argue the same as whoa, whoa, whoa, that's all part of a non financed transaction because you create the trust either at or right before closing, just a few days or a week or maybe even a month before closing, contemplating that you were going to convey the property into the trust and then assign the beneficial interest and not report that to us so that you keep that true ownership opaque and away from fence in.
[00:13:29] And this is where we start, you know, dancing around the mulberry bush of well, is it defensible or not?
[00:13:36] While technically it meets the exception as being an exempt grantor revocable trust for that split second that the property is moved into the trust as soon as that beneficial interest is moved and it is all part of an ongoing transaction, a non financed transaction. To convey this property ultimately to an end buyer, you would have to, you would have to report that transaction because you have now conveyed the property, you have conveyed residential property in a non finance transaction to a trust that is not exempt because you have conveyed. Now a lot of people would argue with me on that other, I know another lawyer, at least one other lawyer in the country is going to argue with me on that. But I always tell people, I go, you know, this is the same thing, it's called a structured transaction. And early, early on, when I first started practicing law, way back in the late 90s, a lot of people understand that if you deposit $10,000 or more in cash with a bank or if you do anything, $10,000 or more cash, that is called a suspicious activity. And that gets reported to FinCEN as well. All the details of who the people were, where the money came from, what happened, what was purchased, what was going on. That's all a suspicious activity that gets reported to FinCEN. And if you fail or refuse to report it, you could be guilty of engaging in a structured transaction, which is basically conspiracy to commit money laundering, which is a federal crime.
[00:15:13] And if you're doing it willingly and knowingly, you're facing up to five years in prison, plus over a $250,000 fine for engaging in that activity. So it's a bad thing. You don't want to do that.
[00:15:26] So I've had people, you know, back when I first started practicing, they came to me and they said, hey, I've got all this money. This guy bought this house from me, or he, he bought this car from me and he paid me $30,000 and gave me cash.
[00:15:39] And I need to get this in the bank. But I understand the bank is going to report it as soon as I, as soon as I deposit over $10,000. And I don't want to, I don't, I don't want him to report it because I don't want to report where the money came from because the guy, he's not, I don't know who he is, but he's, he's sort of a crook in town. And they'll start looking at me thinking I'm working with him to help, you know, laundry his money or whatever.
[00:16:00] Fortunately, I was smart enough to go to one of the partners in the firm and ask them, and they're like, yeah, he's, he's willing to commit money laundering, and that's against law. So that's when I first learned about money laundering was when within the first couple of years I started practicing law.
[00:16:13] And most, most good lawyers do understand money laundering is bad and you don't want to be involved in it because you will go to prison just like the clients will.
[00:16:23] And so I learned early on, you don't engage in structured transactions and you do not advise clients on how to structure that transaction to get around those anti money laundering rules. And the FinCEN Real Estate, Residential Real Estate Reporting Rule is definitely an anti money laundering rule that is part of the Corporate Transparency act, this part of the Bank Secrecy Act.
[00:16:48] All these things come together and collide to try to keep our financial system and our real estate system as corruption free as possible.
[00:16:59] So that's the intent and purpose of the law.
[00:17:02] So I would just warn people and I warn title agents too. I represent title agents, I work with title agents all over the state, all the time, all over the country, all the time, advising them on stuff like this. And one of the things I advise them is if you are involved in a transaction and you are a reporting person or reporting party, you should report that. So if someone comes to you and says, okay, we're hiding the purchase price, we've created a trust, we're going to convey the property into the trust, so now it's in the trust at closing and I'm then going to convey my beneficial interest. So that's a grantor revocable trust that we can exempt from FinCEN filing. And then underneath that title company, you're going to pay the documentary tax directly to the Department of Revenue because we're going to hide the purchase price. And then it's going to go, that beneficial ownership is going to go to someone else who is then going to control the trust and have the right to revoke it and control all the money and control the property. That is a transaction that would be reportable.
[00:18:02] If it is a non financed transaction that will have to be reported to FinCEN through their database.
[00:18:09] And then it comes down to reporting parties. If you're a reporting party, you have a duty by law to report that. Now who is the reporting party?
[00:18:18] And it's sort of a cascade starts, number one with the closing agent, whoever prepared the settlement statement. So if there is a settlement statement involved, I'm sorry, it's a transaction. If the property's going into a trust at closing or going into an LLC or a family limited partnership or a corporation at closing, it's gotta be reported. I'm sorry, it's just gotta report, You've gotta report it.
[00:18:41] And underneath, if the trust changes at closing, you have to report number one, who the beneficiary was initially and then who the subsequent beneficiary is. You have to report all of that because that's what wants to know. And if you're not reporting that as a reporting person because you are the one who prepared the settlement statement, you're in trouble now. I said it was a cascade. So reporting person starts with the person who prepares the settlement statement, then it falls down to maybe the person who distributed the money, the person who closed the deal, settled the deal, the person who searched the title, the title underwriter. May be the reporting party. And you just keep going down that line and down. At the bottom of the line is the person who prepared the documents. If that's a law firm, they would have to report it or the law firm. If the law firm recorded the document, whoever records the document. So if it's a law firm that records the documents, the law firm's going to have to report it. So pretty much reporting persons are title agents, title underwriters and lawyers, law firms, they are on the hook for reporting this. Now let's say you're involved in a transaction that doesn't involve any of those people. You do a tabletop transaction, you record your deed, you prepare your own deed.
[00:20:00] People do. I know it's not right. As Abraham Lincoln said, he who represents himself has a fool for a client.
[00:20:07] But we see it all the time. People do kitchen top tabletop closings and they prepare their own deeds, they prepare their own documents, they convey the property, they convey the beneficial interest and into the trust, they do everything. And then there's no reporting person involved in that transaction. So nothing gets reported to FinCEN in that case. So it's one way around it. Another is you prepare your own deed, you record your own deed from yourself into an llc.
[00:20:35] There's no reporting person involved.
[00:20:37] So again, those are not reported simply because there's no reporting person involved. Now if FinCEN finds out that a law firm or a title company is preparing these documents in the background, they're just putting someone else's name on it as the preparer and they're letting that someone else handle the recording.
[00:20:56] No, you know, that title company, that law firm is probably going to get in trouble with FinCEN if FinCEN discovers it and discovers that, hey, you know, these were bad, bad people and in essence you were helping them skirt and structure their skirt the law and structure their transactions in a way that they did not report to us. Just the same way as if you were taking their ten thousand dollar deposits, their thirty thousand dollars and busting it up into three or four thousand dollar deposits and taking it around to different banks around the country, around the state and depositing the money on their behalf and or even advising them to do that, you are assisting them in structuring a money laundering transaction. That gets around the spirit intent of the rules. Because when it comes to FinCEN and these rules and banking, a lot of times it is the spirit and intent goes a long way with what that rule covers. It's not necessarily the black letter law, it's how it looks hey, you had a transaction here and you, you worked hard to go around us so we wouldn't find out about it. And now we've realized this was a terrorist, this is a drug dealer, this is a human trafficker, this is whatever arms dealer oligarchs that are sanctioned in other countries and you in essence assisted them in purchasing this residential real estate in a non finance transaction in a way that obscured their involvement in the transaction. So not only are we going to go after them because they are bad, bad people, we're also going to go after everybody else that was involved. So we're going to go after every law firm, every title company, every title agent, everybody who touched this deal, who helped them accomplish that obscurity.
[00:22:44] We're going after them.
[00:22:46] So that's my warning to other lawyers, to real estate lawyers especially, and estate planners, people like that, as well as title agents and title companies, that if you are playing hard and fast with this rule. This is not a rule, you don't play hard and fast with FinCEN rules. You, you follow them. The spirit and intent of them. The, and the intent of this rule is to ensure that the banking regulators, the people who are in charge of the financial systems in the United States know what's really happening in these transactions when it comes to residential real estate. Because bad actors have used residential real estate in non finance, in cash deals, non finance transactions, often to hide their dirty money, Their, their money that came from crimes. And then later what they do is they sell that real estate or, or they, they do something and they get their money back another way. This is just sort of, this is off the point of the residential real estate reporting rule. But we ran this recently with a title agent and like I said, I had titled companies.
[00:23:55] I had my own title Company from 2004 to 2022 and prior to that I worked for real estate firms that we did closings or title agencies from 1996 until 2004. So I've been in title quite a while. But one of the things that we learned as a title agent and a lot of title agents may miss, especially younger or inexperienced title agents.
[00:24:17] If someone makes a deposit on a contract and let's say it's a, let's say they make a substantial deposit, it's a big deal. And they make a $10,000 deposit on this residential deal or any kind of deal and that check comes from abc, but the buyer on the contract is xyz and then they cancel the contract. They go cancel the contract, just make the deposit payable back to xyz, that title agent or that escrow agent, whoever was holding the money has just engaged in a structured transaction for money laundering, even if negligently, even if by accident because the money came from ABC and then they paid it back out to ABC or xyz. So you'd never want to pay money back out to, to the person you, you didn't get it from.
[00:25:08] So we always tell title agents, of course you're going to keep a copy of the incoming wire confirmation or the incoming check that came to you for that deposit and if there is ever a cancellation of contract, always go back to that and look at that and make that disbursement of that deposit, that earnest money deposit back to exactly the same party who paid it to. You do not look at the contract and go, oh, it goes back to the buyer. So it's going back to them because that buyer may be someone different. We had it come up because we were the, the trustee of a land trust that was buying the property, but the money had come straight from another party, one of the beneficiaries companies, when they went that they decided to cancel it, it was a substantial deposit and the title company sent us the check and they said, well, you're the buyer, so you get the money back. And we said, whoa, whoa, we didn't give you the money, we are not taking this money. We're going to void your check, send it back to you and you make the check payable back to the entity that sent you the money and you send it straight to them. We've got nothing to do with that because otherwise we would also be involved in that money laundering scheme simply by accident. So you have to watch these, these things. But that's money laundering. That's separate from this real estate a little bit, this residential real estate reporting rule. So I just want to get that out there because I know that there is at least one other lawyer in the country out there preaching that it is perfectly fine to take title into a land trust at closing where the current owner seller is the beneficiary. And then immediately at closing or right after closing, you assign your beneficial interest to the true end buyer and that's not reportable and FinCEN doesn't have to be involved because you've got the exempt trust that it's coming into and then the personal property interest in the trust is being conveyed also. That's another problem with that is while that may fit absolutely perfectly in Illinois, Indiana, Florida and other states that have land trust statutes on point that say that the beneficial interest in a land trust is personal property.
[00:27:24] Other states do not have those statutes. Other states may not even have any case law. So in those states, I'll tell you the beneficial interest in the land trust is considered to be an equitable interest in real estate. So even just assigning your beneficial, no matter what that, that trust says, because they've got statute abuses and all these other statutes around trust law in those other states, they're going to go, well, you're actually still conveying an interest in real property. Even when you assign your beneficial interest. Even though the trust agreement may say your beneficial interest is 100% personal property, this jurisdiction does not recognize that we don't have that concept. It has to have some equitable interest still in the beneficiary. So you are conveying a real estate interest for money to someone in a non finance transaction.
[00:28:13] So you gotta report. So that's gonna get the seller in trouble, it's gonna get the title agent in trouble if they refuse to report it, if they just don't report it. Falling into this trap, being lulled into this belief that oh, it's all perfectly okay to do this because it's an exempt grantor trust revocable under the FinCEN rules and the IRS guidelines disregarded for tax purposes. So we're good, you know, we don't have to worry about reporting. I, I do not advise that as someone with a lot of title background, a lot of title experience, someone with a lot of experience in an education in money laundering and someone educated in land trusts in Florida especially 100%. I mean we, we literally, we've written a book on it. You can go to landtrustbook.com if you ever want to buy the book on land trust in Florida. It does not cover this right now because it was written before this rule went into effect.
[00:29:11] But just understand, if you are truly moving property into a land trust or a revocable living trust, and it is revocable, it's not part of a non finance transaction, you are the beneficiary of it. You're doing it for estate planning purposes and asset protection purposes. Even if you do later assign your beneficial interest in the trust to another entity that you control, you're okay. That is true, that's going to be exempt. FinCEN's probably not going to bother you over that. I wouldn't worry about it. It's when it's part of a non finance transaction that you are playing with fire.
[00:29:46] If you go with that advice that hey, I don't have to worry about it. I can assign my beneficial interest as part of this ongoing transaction that we are structuring to work to get around the FinCEN regulations to, to obscure the true purchaser or transferee of this property.
[00:30:09] That will get you in trouble and it will be ugly.
[00:30:13] Like I said, accidental violations of the rule.
[00:30:17] Yeah, it's got some civil penalties to it, but if you are a title agent, you know better, if you're a lawyer, you know better.
[00:30:27] And if you are involved in that transaction and it does later turn out definitely that the end controller of that trust, the end buyer of that property, the controller of that property, was a bad, or is a bad actor who FinCEN may have had on a watch list that you don't even know about. They're just watching what's happening with these bad people.
[00:30:51] And they're not on the OFAC list or the SLDN list or anything like that. So they're not a, you know, a person of interest that you would even know about. But FinCEN's watching them or the FBI is watching them through FinCEN or something like that.
[00:31:05] You've now engaged in conspiracy to commit to create a structured transaction to circumvent the anti money laundering rules, the Bank Secrecy act, the Corporate Transparency act and of course the real Residential Real Estate Rules reporting rule. So don't do that. It's bad and you will get in trouble for it. So that's my two cents on that. I just want to get that out there because like I said, it was brought to my attention by a very smart client, longtime client of our, our, of our land trust company and our firm.
[00:31:43] She brought it to my attention. I want to, you know, put a shout out to her, tip my hat to her for bringing that to my attention, that it was out there that people were doing this. And it did prompt me to do even more research, more investigation. This rul.
[00:31:56] Thinking about it hard over a couple of days and really, really, you know, thinking about, well, why can't we do this? It is an exempt trust. Why can't we do this? And it's, and, and, and it, I just wanted to get it out there to all of my viewers so they are not lulled into this potential trap that you can fall into completely unwittingly and by accident.
[00:32:21] And, and we just don't. I mean, our idea is asset protection. One of the ideas of asset protection is you have to comply with the law.
[00:32:28] Because if you are not complying with the law, anything you do for your Asset protection is out the window because the government can come through all these entities and trust that we can create, they can come through all that and get to you.
[00:32:42] You will be the one wearing the orange jumpsuit. You will be the one subject to a massive restitution lean. And we don't want you to do that. We don't want to get you in that kind of trouble. So we just want to make sure that you're educated, you understand it if you're a title agent, title company, another real estate lawyer, estate planning lawyers. I'm actually giving a talk out in Vegas to over a thousand estate planning lawyers from all over the country and we will cover this topic. But my biggest warning for estate planning lawyers is don't be so flippant about, oh well, we'll just do a deed into our client's llc. We'll just do a deed into our client's family limited partnership or their corporation for this residential real estate that they own.
[00:33:27] You may have to report that that may be a potential pitfall that you're falling into just because you've always just deeded it in and you're not a real estate lawyer. You don't deal with this all the time.
[00:33:38] But understand that can get you in trouble at because you are a designated reporting person, because you prepared the deed and you're may, you're probably handling the recording of it and we don't want you to get in trouble with that. So keep your eyes open, keep your ears open.
[00:33:56] If you get a gut feeling that oh well, this is, this is a non financed transaction they're engaged in here or they're conveying it into an entity and we need to really be mindful of what could happen with that. I just want you to be thinking of it because what gets us in trouble is we don't know what we don't know. And I just want to make sure that you at least can understand that this is out there. Number one, some bad information that is getting out there. Number two, some true exemptions that you may have available to you when it truly is exempt and when it's not exempt that you need to file. And to file, yeah, you need to go to, I think it's bsa.fincen.gov you've got to sign up for an account. Filling out the form is pretty easy. Most of the information that is provided on the transaction is they want to know where the money came from, value of the property, they want to know a lot of information about the property, including the property address the legal description, the tax parcel ID number, if there is one. And for just about every single party involved, they want to know, and I'm talking about the reporting person, the trustee, whoever signs the documents, the beneficiaries. If the beneficiary is an entity, they want to know who controls that entity, meaning Anyone who owns 25% or more of that entity, or maybe an officer of that entity or otherwise just tells that entity what to do. They want to know those human beings, the human beings, they want to know their name, their legal name, their residence address, their home address, can't be a P.O. box, can't be a business address. They want to know their Social Security number or their ein, or if they're foreign, they want their tin, or if they don't have a tin, they want their foreign passport number, they want something they can track them with and they want their date of birth if they are a human being.
[00:35:58] So understand if you are a lawyer, if you're a title company doing closings, pretty much anybody who is touching that transaction, you're going to need their name, residential address, Social Security number, ein and date of birth. So just be prepared that you're going to need that information. Whenever you go to file this report, there are 111 boxes or points of information on that form.
[00:36:26] In the smallest transaction you will have to fill out at least 40 of those and FinCEN estimates that about 60 entry points will be clicked, checked or filled in on average on each transaction that is reportable. They estimate over about 150,000 transactions a year will be reportable to FinCEN on this.
[00:36:50] Um, and yeah, there's some great information on the fincen.gov website about this. They have a frequently asked questions that the. The most recent Update was mid February 2026.
[00:37:03] As I'm recording this, they have a fact sheet.
[00:37:06] The form that you actually fill out is a PDF form that you can download, fill it out offline, you log in. Once you become a user as a reporting person and you upload it, you type in your PIN number, which you will get from FinCEN through the website and it's filed and you're done.
[00:37:27] The parties just have to certify the information they have provided to you is true or not. They do not have to provide you with a copy of your driver of their driver's license. It's not a bad idea to get it, which you would need it for other purposes anyway if you are conducting the closing.
[00:37:43] But it's not required that you retain a copy of it for FinCEN purposes. Maybe you may need to require to retain it for other purposes. But FinCEN does not require you to retain a copy of their passport or their driver's license or anything like that. You do have to retain a copy of their certification of the information that they have provided to you. You have to maintain that for at least five years in your files. And otherwise, you know, you just need to sit down and take a weekend and read the rule, get to know it. There's lots of great videos out there. If you are a title agent or a title underwriter, I'm sure you have watched tons of video about this recently. Webinars for lawyers. There are tons of continuing legal education courses and webinars out there to go to, to attend, to watch, to listen to, and to learn this, because this is definitely if you practice residential real estate, if you are an estate planning attorney, if you are an asset protection attorney, if you are a title agent or a title underwriter in any way, if you are an escrow agent, you need to know this law. You need to know this new rule is absolutely imperative that you take the time to learn it, that you have an attorney that you can call, a colleague you can call, you can touch base with if you have questions. So you guys can run this back and forth across each other and really delve into it. And my advice is, if there's any inkling that you think you should report, report. It's the safest thing to do. I know a lot of folks, a lot of our clients especially, they really cherish their privacy.
[00:39:18] A lot of people are, you know, right or wrong, I concerned about the government having their information and what they own and where they have it and all that good stuff. Understandable.
[00:39:30] But if you were going to deal in residential real estate in the United States, there is always a chance that it's going to have to be reported. No matter how many layers you hide it behind or how you structure your transaction, whenever you go to transfer this property out or the property in, you will have to comply with this.
[00:39:51] Now that always brings me to Everybody goes, well, how is this information held? Because everybody remembers, you know, when Doge came In early 2025, one of the first things that they did in early 2025 is they, you know, broke down the barriers, got into all of the Social Security Administration databases, they got into the Internal Revenue Service databases, and they downloaded all that information. We don't know what happened to that information, but we do know based on court filings by the Department of Justice and by those organizations is that that information has been exfiltrated and they don't know who has gained access to it since. Because there was, at least with the IRS information they test, they, they filed a corrected affidavit certification with the court that said, hey, for 83 days it went out into the Internet, the IRS data and the Social Security data, and we don't know what happened. We don't know who got it, we don't know who's touched it, and we don't know if we can ever get it back. So we are certifying to the court that it may be out there. So just be prepared that that's out there.
[00:40:55] But the FinCEN data is retained in the Bank Secrecy act databases along with SARS reports from banks that are, they're reported usually automatically by their computers constantly into the BSA database along with this information.
[00:41:14] This information is not subject to being released under a Freedom of Information or FOIA act request to anyone.
[00:41:24] It is very locked down. Only people with a need, a demonstrated need to access the information are allowed to access it. So it's usually law enforcement agencies who have demonstrated a need, a legitimate lawful need to access specific information. And they only get access to that information. They don't just get free run through the entire database. They can't download the whole thing or anything like that.
[00:41:54] It is maintained in databases and that network and those computers are kept at a level of security that is just a smidgen hair below the computer networks that, that, that control the United States nuclear codes and our nuclear capabilities are our true, you know, military tippy top secrets that we have in this country. The BSA database is just right, right below that, I mean, just almost there.
[00:42:27] So it is considered top secret information. So while yes, your information is provided to them, it is probably even more secure now than your tax return data or your Social Security Administration data. At this point it is more secure. So I tell clients, don't be overly exercised about this because your data is being reported to FinCEN. Trust me, if you have a bank account in the United States, you're already there, they've already got you because they've already got pretty much if. And I've talked to folks at other banks, at banks before and they've told me they're like, hey, if you deposit over $20 at an ATM in cash, we're reporting that to FinCEN.
[00:43:14] It's automatically, we report anything cash coming into our bank is going to FinCEN. So that's certain banks that I've heard that from. People at those banks because they're like, we don't want to get in trouble.
[00:43:25] Other banks have gotten in trouble in the past because they failed to report and then later their customer was deemed to be pretty much a super villain. And then suddenly they're like, oh, report everything they've ever done for the last five years to our bank. Little late, but late's better than never in reporting sars.
[00:43:48] Suspicious activity reports are very important and this falls residential real estate reporting rule is on that same level. So don't play around with it. Don't believe everything you hear on the Internet, even though this is coming to you via the Internet.
[00:44:07] Don't believe everything you hear from everyone, even if they are another attorney telling you this, because it can actually get you in trouble.
[00:44:16] If you don't believe me, go back and do what I did. Read the code, effect regulations around this, study the rules, study the comments from the public and the industries that are affected by this, all the comments that they filed. Read the frequently asked questions, read the answers, read the preambles, read everything that surrounded this rulemaking. A lot of people think that government agencies just come up with these rules and willy nilly and throw them out there. And this rule was first promulgated, finally came out, the final rule came out in August 2024. I mean that was it. That was the last rule that came out and it was supposed to go into effect in December 2025. Postponed it to March 1, 2026, but the law passed in 2016.
[00:45:05] So between 2016 and 2024 they worked these, these, these agencies and the industry worked on coming up with this rule that everyone can understand, everyone can comply with and in good faith get it, you know, understand the rule.
[00:45:23] Now it's sort of like it came out of the same law as the beneficial ownership information, the BOI reporting for entities. You may remember that one that was on, off, on, off for, for a couple of years there it has been languishing at the Supreme Court. Supreme Court, you know, sent it down back and, and just said, well you can continue enforcing it and we'll get around to determining whether it's constitutional or not someday maybe.
[00:45:54] And so you sort of have a division of appellate courts throughout the country. Some say it is constitutional, others say it isn't.
[00:46:02] So what the administration did with that one, the executive branch did with that one is they said, look, we're, we don't know, so we're not going to enforce that rule except against foreign companies. So if you're a foreign company, you have to comply with the beneficial ownership information reporting rules. So of course all these foreigners just come in, maybe the bad guys come into the United States and they'll just open a US Company and then that company may be owned by one of their foreign companies, but that doesn't get reported.
[00:46:27] So there that that one has loopholes as you know, big as the Chesapeake Bay Bridge Tunnel to drive through.
[00:46:37] But that would be one of those that it actually would capture.
[00:46:40] If you conveyed the property into an LLC at closing and then you conveyed your membership interest in the LLC to someone else to hide the transaction from FinCEN, the BOI reporting would capture that.
[00:46:55] So just want to let you know that's where we stand with this right now. Of course, as the rule gets its legs and people actually put it to use and all these different transactions start to hit it, the frequently asked questions will be expanded.
[00:47:09] FinCEN will have more answers to more scenarios as they come up. So just be prepared.
[00:47:15] If you are in the industries that are considered to be reporting parties, you should definitely be subscribed to the fincen.gov alerts. You can just subscribe there and you will get an email periodically from them to say, hey, this is the latest news. This is the latest update of what's happening. May have absolutely nothing to do with this rule.
[00:47:35] May have absolutely nothing to do with anything that you have anything to do with, but at least you're getting those on a regular basis and you can keep up with the latest and greatest changes to this rule. Because I'm not going to be able to record a video every single time something changes with it. But at least I've given you some food for thought here. I hope if it's helpful to you, please like it.
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